PMI-001 Q&A – Section 5: Cost Management (11-20)

Section 5: Cost Management

While working on a project in another country, you are asked to make a “facilitating” payment so the country officials will issue a work order. What should you do?
A. Make the payment.
B. Ask the person for proof the payment is required.
C. Seek legal advice on whether such a payment is a bribe.
D. Do not pay and see what happens.
Answer: C

Whenever you are uncertain of whether a payment is a bribe, you should discuss the situation with legal counsel.
Source: PMP® Exam Prep Page: 489

You are reviewing the expense reports for one of your team members when you notice a payment he made in another country. You think the payment is a bribe. What is your FIRST course of action?
A. Seek legal advice.
B. Contact the payee in the other country and ask if the payment was a bribe.
C. Ignore the problem; it is in the past.
D. File a permit authorizing the team to make such payments.
Answer: A
In this situation, the company might have to pay large fines. It is best to ask for legal advice.
Source: PMP® Exam Prep Page: 489

Your project is being completed in another country. It is going reasonably well and is ahead of the cost projections when one of the local officials informs you he will make sure the project work stops unless you pay him US $50. What is the BEST thing to do?
A. Make the payment.
B. Offer to pay more than the requested amount to get more support from the official in the future.
C. Offer to pay a smaller amount to discourage future requests for larger amounts.
D. Do not make the payment.
Answer: D
Such payments, however small, are bribes and could incur millions of dollars in fines for the company, including fines for the project manager, and possibly even jail time.
Source: PMP® Exam Prep Page: 489

You are working on a new oil purification project in a foreign country. A person informs you that you will have to pay him a “transfer fee” for the permit to move heavy equipment through the city. What is the FIRST thing you should do?
A. Pay the fee, but only to the city.
B. Do not pay the fee.
C. Make sure the person is really a government official.
D. Negotiate openly with the city officials.
Answer: C
Only government officials can collect routine government fees.
Source: PMP® Exam Prep Page: 489

Your company wants to assign a resource to your project and asks you to bill that resource to the customer.
This concerns you because you get a bonus for maximizing billings to the customer. What is the BEST thing to do?
A. Maximize customer billings in any ethical manner possible.
B. Ask for the customer’s approval before adding the resource to the project scope.
C. Ask for clarification of the intent of adding the resource.
D. Remind the appropriate members of the billing organization that monetary compensation is not worth compromising the integrity of the individual or the organization.
Answer: C
Professional and social responsibility requires the investigation of any instance where the legitimate interests of the customer may be compromised. If such a compromise is found, action must be taken.
Source: PMP® Exam Prep Page: 483

The customer responsible for overseeing your project asks you to provide a written cost estimate that is 30 percent higher than your estimate of the project’s cost. He explains that the budgeting process requires managers to estimate pessimistically to ensure enough money is allocated for projects. What is the BEST way to handle this?
A. Add the 30 percent as a lump sum contingency fund to handle project risks.
B. Add the 30 percent to your cost estimate by spreading it evenly across all project activities.
C. Create one cost baseline for budget allocation and a second one for the actual project management plan.
D. Ask for information on risks that would cause your estimate to be too low.
Answer: D
Presenting anything besides your original estimate (allocating more to the budget) is inaccurate and calls into question your competence and integrity as a project manager. The customer should list potential changes and risks to your estimate. If the costs and risks are justified, you can increase the budget.
Source: PMP® Exam Prep Page: 483

You are doing business in a foreign country and you are advised by your local contact that it will be necessary to make payments to certain officials in order to get the contract. Such payments are expected in the other country, but are illegal for people from your country. What should you do?
A. Have the local contact make payments.
B. Refuse to make the payment and hope to get the contract solely based on your company’s abilities.
C. Call your government officials and ask for direction.
D. Amend your price increasing the cost to reflect the payments to be made to local officials.
Answer: B
Since it is illegal, ethically you must refuse to make the payment.
Source: PMP® Exam Prep Page: 489

A project manager is finalizing a project that has had repeated problems with cost conformance. He is concerned about what management will say. Which of the following types of information would be BEST for the project manager to use to evaluate performance?
A. The cost performance index (CPI)
B. A list of complaints from senior management
C. The last bar chart
D. The project budget
Answer: A
Ask yourself which choice helps evaluate cost performance. Notice choice D, the project budget. This deals with cost, but not performance, as there is nothing to compare against the budget listed here. There is no comparison to a previous budget or a comparison of actual to budget. Therefore choice D cannot be best.
The only choice that addresses cost and performance is choice A.
Source: PMP® Exam Prep Page: 241

During project executing, one of the electrical engineers informs the project manager that the life cycle cost of the new heating and air conditioning system is higher than the life cycle cost of another heating and air conditioning system. What should the project manager do?
A. Determine if there is room in the project budget for the additional cost.
B. Select the product with the lower life cycle cost.
C. Select the product with the best life cycle cost to earned value ratio.
D. Select the product with the lowest maintenance cost to life cycle cost ratio.
Answer: B
Generally, the lower life cycle cost should be selected. The extra cost (choice A) may not be costs of your project. The ratios in choices C and D are fictitious.
Source: PMP® Exam Prep Page: 231

Which of the following is NOT needed in order to come up with a project estimate?
B. A network diagram
C. Risks
D. A change control system
Answer: D
A change control system is not required to obtain estimates, but without the other three choices, you cannot develop the estimates. You need the WBS to define the activities, the network diagram to see the dependencies, and the risks to determine contingencies. NOTE: These are high-level risks, not the detailed risks we identify later in the planning process group.
Source: PMP® Exam Prep Page: 233